Agreement in Principle: Frew vs. Hawkins

On April 5, Texas House and Senate leaders
announced an agreement in principle to settle finally the
14-year-old Medicaid lawsuit known as
Frew vs. Hawkins
. The class action lawsuit, originally filed in 1993, alleged
numerous, serious failings in the state's efforts to ensure all
children enrolled in Medicaid were receiving appropriate preventive
and specialty care services available to them via the
federally-required Early Periodic Screening Diagnosis and Treatment
Act (EPSDT). These services are known in Texas as "Texas Health
Steps." In 1995, the state and plaintiffs negotiated a consent
decree to resolve the case. However, within a few years the state
challenged plaintiffs' right to enforce the decree, compelling the
case back to the federal courts, including two state appeals to the
Supreme Court. At each juncture, the federal courts sided with the
plaintiffs. The settlement was announced just days prior to the
case returning to Federal District Judge William Wayne Justice to
rule on the final Corrective Action Plans.

On April 9, Judge Justice reviewed the proposed agreement, some
elements of which will continue to be negotiated over the next
several weeks. In June, Judge Justice will again review the
agreement and the funding that accompanies it. The agreement is
subject to his final approval and oversight.

Legislative leaders and lawyers for plaintiffs in the case
recognized that dwindling physician participation in Medicaid has
left many of the program's recipients without a medical home, and
that means increased costs to the state and poorer health care for
Medicaid patients. A 2006 Texas Medical Association survey found
that only 38 percent of Texas physicians accept all new Medicaid
patients, down from 67 percent in 2000.

The agreement allocates $707 million in state general revenue
($1.8 billion in state and federal funds combined) to increase
physician and dental reimbursement rates, improve outreach and
education to Medicaid-enrolled families, and improve the
availability of medical and dental services in rural and border
regions of the state. Since the agreement is still being fine
tuned, a detailed document has not been published. However, what is
known is that the agreement will allocate significant new monies to
improve physician and dental reimbursement rates - the largest
increases in nearly 15 years. Specifically, the agreement
allocates:

$203 million to fund a 25-percent increase in physician
reimbursement

$50 million for targeted rate increases for physician
subspecialists

$258.7 million to fund a 50-percent increase in dental
reimbursement rates

$150 million to implement "strategic medical and dental
initiatives." This part of the agreement is still being
negotiated, but lawmakers indicate that the monies will be used
to fund such efforts as mobile dental clinics in underserved
communities, loan forgiveness programs for physicians and
dentists who agree to practice in underserved areas, and/or
improved funding for physician training and graduate medical
education.

$45 million to fund outreach, family and physician education,
transportation initiatives, a toll-free hotline, and other
components of the Corrective Action Plans agreed to in 1995

To fund the agreement, lawmakers used $240 million already
allocated within House Bill 1, the 2008-2009 appropriations act, to
fund physician and dental rate increases. The remaining $466
million will be paid for by applying an across-the-board funding
reduction of .59 percent to all ten articles within the budget.
However, it is expected that the appropriations conference
committee will further establish parameters on how agencies may
allocate the reduction.

To advise the state on how best to allot the monies for
physician rate increases, at TMA's request, the Health and Human
Service Commission is reconstituting the Physician Payment Advisory
Committee (PPAC), which is composed of primary and specialty care
physicians from across Texas. PPAC is expected to convene its first
meeting in early June. A final roster is not yet approved, but all
major state specialties will be represented.

To assure that physicians participating in Medicaid HMOs benefit
from the rate increases as well, TMA has requested that health
plans be required to pass any rate increases directly to physicians
without any administrative deduction or withhold.